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UBS Consumption Indicator reaches new high

The UBS Consumption Indicator climbed to 1.86 in May, reaching its highest level since April 2002. This signals that Swiss consumer spending is continuing to grow robustly.

The monthly UBS Consumption Indicator rose to 1.86 in May, from 1.62 in April, sending out a signal that the consumer environment in Switzerland is still favourable and supporting the UBS economists' view that consumer spending will remain a key growth driver.

The UBS Consumption Indicator is calculated from five sub-indicators: new car sales, the business trend in the retail sector, the number of overnight hotel stays by Swiss nationals in Switzerland, the consumer sentiment index and credit card transactions made via UBS at points of sale in Switzerland. With the exception of the consumer sentiment index, all of these data are produced on a monthly base. The contributors to May's rise were the improved consumer sentiment and the increase in new car registrations - up 11.4% year-on-year over the month. At the same time, business activity in the retail sector cooled only slightly versus the previous month.

The UBS Consumption Indicator is currently well above its long-term average of 1.49, which augurs that private consumption will remain robust for some time. The main factor contributing to Switzerland's strong consumer environment is the country's healthy economy, which is increasingly feeding through into the labour market. As capacity reaches its limits and orders keep coming in, more companies are expanding their workforces. As a result, households should remain willing to go out and spend. All in all, we expect consumer spending to rise by 1.9% in 2006, which is almost 0.5 percentage points above the average for the last ten years.